Money and Life
(Financial Planning Association of Australia)
The Australian Taxation Office (ATO) refunds billions of dollars to over three quarters of all taxpayers annually, but it takes a little effort to ensure you get as much tax back as you can. But while Australian taxpayers receive on average around $2,500 in tax refunds annually, there's no guarantee two people earning the same income, will receive the same tax refund.
That's because many Australians fail to maximise their tax deductions they're legally entitled to, and even worse, ATO estimates around 200,000 taxpayers who failed to lodge tax returns last year, would have received a refund.
Getting your financial house in order
While tax deductions are the easiest way to maximise your tax refund, there's some homework to be done to ensure you maximise the tax you get back.
Much of this homework revolves around good record keeping, to ensure everything you claim as a tax deduction is substantiated with a valid receipt. For example, if you're claiming driving expenses for a car that you own, make sure they're diarised along with dates and mileage. It's no different when you're claiming back charitable donations for any amount over $2, so make sure you retain all receipts.
The key variables
Most of the key variables that impact on how much tax you get back, revolve around legitimate work-related expenses that your employer hasn't already reimbursed you for.
If you're unsure of what's tax deductable, why not check what other people in your job are claiming as deductions? But regardless of the industry you're in, generally speaking, most deductions include expenses relating to:
If you're unsure about what work-related expenses you can claim, check out the ATO website.
Super, investment costs or other items
Another way to receive a bigger tax refund is either by making a personal contribution to your super or by adding to your spouse's fund before the end of the financial year. A maximum rebate can be achieved by contributing $3,000 into super.
Given that tax matters relating to investments are inherently complex, having a professional correctly review other investments can return in spades. For example, it may be appropriate to consider offsetting the loss you're carrying on any assets (like shares and units) against a profit made on the sale of others' assets, on which capital gains tax is now payable.
A timely review of the income protection insurance (you already have through your super), can also result in tax benefits. That's because a policy taken out in your own name (this financial year) can be claimed against assessable income, thereby potentially reducing the up-front cost of protecting your income. Similarly, if you earn more than $90,000 (singles) or $180,000 (families and couples), you can avoid the Medicare Levy Surcharge(calculated at the rate of 1% to 1.5% of your income) by having hospital cover, which in addition to providing the cover you need, may also be cheaper than the surcharge itself.